March 31, 2009

By By Glenn Peoples, Nashville

The new partnership between Spotify, the new darling of streaming music sites, and UK digital media delivery company 7digital will allow Spotify users to buy MP3 downloads of over six million tracks, but combining a streaming service with a paid download store is more complicated than simply adding one product offering to another.

The best and most successful download stores are not streaming services. The best streaming services are markedly different than download stores. Most noticeably, they offer free music and ask for little in return. Such a product attracts the most price-sensitive consumers. While it is great to offer music to those not willing to pay for it, a company needs to make money.

If downloads are going to be a major source of revenue for a streaming site, the way music services sell downloads will need to change. The current method of selling downloads on a streaming site adds no salesmanship beyond a passive link to purchase at iTunes or Amazon.com. Links to tickets and ringtones, if available, tend to be included as an afterthought rather than integrated into the user experience.

Lala is quietly working on its own solution to the conundrum. The browser-based service allows users to stream any track once before requiring the purchase of either a ten-cent web stream or an MP3 download for further listens. Once either is purchased, the song is added to the user's collection (stored remotely on Lala's servers); the purchase of an MP3 results in the track being placed on the user's hard drive.

It is too early to pick winners and losers, but here may be something to Lala's approach. In not offering unlimited streaming, Lala discourages loitering without purchasing. Not only does Lala encourage purchases, it very simple purchase process. The site allows for one-click purchases (no need to leave the page), has very competitive prices and has frequent MP3 sale specials.

Unlike the one-click method of Lala, Spotify will send its users to 7digital to purchase the tracks. A BBC News article says Spotify is working on a way for its users to purchase MP3s while within the service's application. Even so, Spotify may not need to rely heavily - or as heavily as its competitors - on downloads for additional revenue. Its product is so well designed that a portion of users may be willing to pay for the ad-free version.

U.S. users do not have access to Spotify. The best way for them to experience the site is to view some of the many reviews posted on YouTube. This 6.5-minute review is among the best.

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